Mutual Funds

Welcome to Mutual-Funds.org, a site dedicated to helping people learn about mutual funds. Here,
the novice investor can learn the basic fundamentals of mutual-fund investing, yet the advanced
investor can also find useful information.

We answer the most foundational questions regarding mutual funds, such as, “What is a mutual fund?” (They are a collection of stocks, long-term bonds, short-term investments or other securities, as these are all known).

We also discuss the technical aspects of investing, like what is a NAV and how does one read a prospectus? (No, NAV does not stand for the Lincoln Navigator you purchase after successfully investing in mutual funds, nor does a prospectus give you claim to the gold under your neighbor’s house). This site exists to help people like you understand mutual funds better, so you can make wiser investment decisions.

Later on, you will see that investing in mutual funds is, in many ways, much simpler than purchasing individual stocks or bonds. However, wise investors must have at least a basic understanding of how they are investing.

Without knowledge of one’s investments, how is one to invest profitably?

Investors must know simple processes, even as simple as how to put money into and withdraw it from a mutual fund. They must also grasp what the fund claims it is doing and what it is actually doing, so they can evaluate its performance.

Mutual-Funds.org helps investors, like you, understand all of this, through a course format.

The Course

Our eight-lesson course is written in plain, easily understood English. All technical terms are explained, either when they are used or at the end of each lesson. As with any discipline, investing has its own technical jargon. Barista’s ask, “That was a half-caf, 2-pump, ½ splenda macchiato,” and that means something to someone, supposedly. Doctors ask, “Can I have the scope and clamps,” because patients get nervous when a doctor says, “Get me that thingy and those…what are they…nose pinchers, yes.” Similarly, investors have their own technical jargon. They do not typically use this vocabulary to avoid off-putting comments. Rather, it allows them to succinctly state very specific ideas that are important in the financial world.

Throughout this site, you will find these complex ideas broken down into simple English, so the average person can understand.

When we were developing this material, a course format quickly appeared to be the most natural
mode of presentation. Through the following eight lessons, you will find a progression from the simple concepts to the more advanced ideas. For instance, the first lesson explains what a mutual fund is, while the later ones break down their financial statements. Interspersed throughout these lessons are practical points, step-by-step guides and lists of other useful resources.

Here is a breakdown of the mutual fund course by lesson.

1. Unit 1: An Explanation of Mutual Funds
a. Lesson 1: Understanding What a Mutual Fund Is
b. Lesson 2: Considering Why Mutual Funds are Good Investments
c. Lesson 3: Looking at the Types of Mutual Funds

2. Unit 2: The Fees and Expenses of Mutual Funds
a. Lesson 4: Understanding Mutual Fund Charges
b. Lesson 5: Examining Tax Implications on Mutual Fund Investing

3. Unit 3: How to Invest In Mutual Funds
a. Lesson 6: A Step-by-Step Guide on Investing in Mutual Funds
b. Lesson 7: Evaluating Mutual Funds via Their Prospectus and Annual Report
c. Lesson 8: How to Find Good Mutual Funds and Additional Resources

This course-like structure allows beginning investors to learn about mutual fund investing in a
methodical way. It also provides specific places advanced investors can go to when they need
answers to specific questions. For example, what are 12b-1 fees? That would be answered in Lesson
4, “Understanding Mutual Fund Charges.” Thus, the course helps all investors, and everyone will find it easy to use.

Who We’re Trying to Help

Thus far, we have assumed you are the person we are trying to help. There are very few people who
cannot begin investing in mutual funds, and almost everyone should start now. No matter what you are saving up for, the principle of compounding interest is powerful.

The principle of compounding interest is very simple: Interest is earned on interest that has already been earned. For instance, if you were to invest $100 in a fund that earned a 5% gain (interest) each year, then after one year you would have made $5, and have $105 in the account. During the second year, you would make $5.25 (5% of your $100 is $5, and 5% of the first year’s earnings is $0.25). Thus, after two years, you would have $110.25 in the account.

A quarter may not seem significant to you. (After all, 25 cents won’t even purchase a gumball anymore). However, the chart below shows the power of this simple principle over time. The left example illustrates a long-term investment, and the right one considers a shorter time span. Each instance assumes a 5% gain annually and an initial investment of $10,000.

Year	Earned in Year	Total Balance
1	$500	$10,500
2	$525	$11,025
3	$551	$11,576
4	$579	$12,155
5	$607	$12,762

Year	Earned in Year	Total Balance
1	$500	$10,500
10	$775	$16,288
20	$1,263	$26,531
30	$2,058	$43,216
40	$3,352	$70,395

As you can see form the chart, an initial $10,000 investment quickly grows. In just five years, it is worth more than $12,500. However, if that investment is left untouched for decades, then it can earn more than $3,000 each year, eventually. Some people looking at this chart may think they need to only invest in long-term goals, because that is where the greatest profits are. However, that is unrealistic.

Everyone also faces short- and mid-range goal and obstacles. This chart is not meant to convince you to invest only in retirement. Instead, it shows the importance of investing today, not tomorrow or next year. Every day you put off saving is one less day your money could be earning compound interest.

You might be thinking right now, “That is a great plan, but I don’t have money to invest right now.” If you are reading this from a computer you purchased or via an internet connection you pay for, then you have enough money to begin investing in mutual funds. Although the above example assumed an initial investment of $10,000, as does the example on any fund’s prospectus, people can begin investing in mutual funds with as little as $50. Many companies will agree to waive some account fees, which are often assessed to small accounts, as long as you agree to make small, but regular contributions to the account. With just $50, the cost of a dining out one night, you can begin saving for your short-, mid- and long-term goals.

Why We’re Here

ICI.org conducted a survey of mutual-fund investors. According to the survey’s results, 92 percent of investors are saving for retirement. 30 percent want to save up for education expenses, and 14 percent said they were using mutual funds to help them save for a real estate purchase. (Respondents were able to check more than one box on the question). Whatever your goals are, we want to help you achieve them.

That is why we are here, to help you achieve your financial goals. Mutual funds offer a practical way for the average person to work toward his or her financial goals. Mutual-Funds.org offers a practical approach to understanding mutual funds. Our course will help you achieve your goals.

Please realize that we are not professional financial advisors. Because everyone’s individual
circumstances is unique, it is wise to seek the counsel of a professional financial advisor. We do not offer any financial advice on this site, nor through this course.